Calif. lawmakers to vote on Democratic budget plan

SACRAMENTO 
California lawmakers have scheduled a Wednesday vote on a Democratic proposal designed to close part of the state's $24.3 billion budget deficit, but the plan already appears doomed to fail.

Gov. Arnold Schwarzenegger and Republicans consider the package incomplete because it does not address the full deficit and have opposed Democrats' call to raise taxes.

Schwarzenegger Communications Director Matt David criticized lawmakers for calling Wednesday's session, saying they are "wasting time running yet another drill for show."

Even if the Democratic budget package fails, Wednesday will mark the first time the deficit will be debated by the full Legislature since the governor laid out his revised budget proposal last month.

State finance officials said balancing the budget quickly for the coming fiscal year is critical. The state treasurer and controller have warned that without a balanced spending plan by next week, California will not have enough money to pay all its bills by the end of July.

Democrats proposed a $23.2 billion package containing a mix of spending cuts, accounting shifts, fee increases and new taxes on tobacco products and companies that drill for oil. They say it does address the full deficit, only lacking the governor's demand for higher reserve.

The plan would cut $5.5 billion from public education but would return billions of dollars to schools in the future.

Senate Majority Leader Darrell Steinberg, D-Sacramento, said Democrats rejected the governor's proposals to eliminate health insurance for nearly 1 million low-income children, the state's welfare-to-work program and college grants.

"The governor's price, as laid out in his series of May revises, is too high," Steinberg said Tuesday in a briefing with reporters. "We're not eliminating the safety net for the most vulnerable Californians. We're not doing it. It's anathema to everything I believe in."

Instead, Democrats proposed a 9.9 percent tax on oil production in the state, increasing the cigarette tax by $1.50 per pack and imposing an increase of $15 in the vehicle license fee, which was raised earlier this year. The vehicle fee would allow the state to keep open 220 state parks Schwarzenegger proposed closing.

Schwarzenegger administration officials said the governor is not willing to sign any budget package unless it address the full $24.3 billion deficit for the fiscal year that begins July 1. "If we're going to solve this thing, then we're going to solve the whole thing," said the governor's spokesman, Aaron McLear.

Schwarzenegger has proposed a fee on homeowner's insurance policies, averaging $48 a year, to fund fire and emergency response services, but he opposes the Democrats' taxes on oil companies and tobacco.

McLear said the governor believes raising such taxes would cost jobs at a time when the state is experiencing an 11.5 percent unemployment rate, its highest in modern record-keeping.

The governor's plan would cut about $15 billion from state spending while the Democrats' plan contains $11 billion in cuts. Schwarzenegger's proposal would make up the rest of the deficit by borrowing from local governments, shifting money between accounts and accelerating the collection of personal income and corporate taxes.

Some Republican support will be needed for the Legislature to pass tax hikes because of California's two-thirds vote requirement. Democrats have 49 seats in the Assembly, where 54 votes are needed to pass a budget. They hold 25 seats in the Senate, where 27 votes are needed.

Thanks to a two-year budget package passed in February, California already has a budget for the coming fiscal year. It's just wildly out of balance.

The two-thirds vote threshold for budgets and increased taxes has led to summer-long budget impasses in recent years, including a record-length stalemate last year.

The size of the deficit and the ideological lines that have been drawn so far – Democrats want new taxes and fees, while Republicans want all spending cuts – suggest another drawn-out budget fight lies ahead.

"My hope is that Democrats will put up a serious and complete proposal on the table that reflects the spending reductions needed to avoid the catastrophe that's coming," said Senate Minority Leader Dennis Hollingsworth, R-Temecula.

Without a balanced budget, many services normally funded by the state would either stop or be significantly pared back once the state runs out of cash at the end of July.

State contractors, including office suppliers, electricians, prison cleaning crews and small businesses that provide adult day care services, will see their payments delayed or receive IOUs.